Why sales teams need to adapt to the subscription economy

 The “subscription economy,” in which pay-per-product companies are transitioning to subscription-based business models, has transformed the ERP software industry. Software as a Service (SaaS) as a percentage of total enterprise software revenue rose from just 6% in 2010 to 75% in 2018, totaling more than $380 billion annually. These days, the subscription model has spread well beyond software to a wide array of other industries, from airlines to health and wellness.

What's less appreciated is how the subscription economy can be weaponised against sales teams that fail to adapt to the changing landscape. The results of a recent EY study show that only 55% of respondents feel their businesses are ready to shift to the subscription model. Respondents were concerned their sales teams lacked the talent, skills and infrastructure needed to successfully sell their products on a subscription basis. No department within a company will be more affected by the subscription economy than sales because it profoundly empowers the customer in several respects. 

Fewers Barriers To Entry

By removing significant, upfront capital expenses, the potential customer pool for the same goods and services will significantly increase. Such growth reflects the strength of subscriptions over capital expenditure-intensive transactions. According to research results, eight out of 10 companies have been sustaining or growing their subscriber base.

Fewer Barriers To Exit

Sales teams must be laser-focused on articulating their unique value proposition. There's much less customer lock-in with subscriptions because there's no upfront investment. Many millennials are "overwhelmed" by their subscriptions, and 43% say they plan to unsubscribe. Never before has a strong value proposition been more of a priority for sales teams.

Personalisation

Because of the direct relationships enabled by the subscription economy, mainly through digital tools, sales teams can gain more knowledge about customer preferences — and they must use it. The key to profitability in a subscription model isn't the number of signups but the length of the subscription. Leadership must outline a compelling narrative about the future so that sales teams can "stomach the J-curve." Younger generations are coming to see the subscription economy as the norm, not the exception.